Business Daily from THE HINDU group of publications
Friday, Aug 04, 2006
Business Daily from THE HINDU group of publications Friday, Aug 04, 2006 |
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Money & Banking
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Financial Institutions PFC raises debt component to Nagarjuna Power Corpn C. Shivkumar
The sources said the changes would help bring power tariffs down by another six paise per unit on a levellised basis or in the range of Rs 2 per unit.
Bangalore , Aug. 3 The Power Finance Corporation (PFC) has raised the debt component to Nagarjuna Power Corporation Ltd (NPCL), which is setting up a 1,015-MW thermal project near Mangalore. PFC, sources said, had raised the debt-equity mix in the mega project to 80:20 from the 70:30. The project costs have already been frozen at Rs 4,299.12 crore by the power regulator — Central Electricity Regulatory Commission (CERC). The revised ratios would now push up the project debt to about Rs 3,439.12 crore. PFC is the lead arranger for NPCL's project debt and has already sanctioned Rs 950 crore, sources said. Other financial institutions in the lending consortium include the Rural Electrification Corporation and HUDCO with a share of Rs 500 crore each. Banks in the lending consortium include the Canara Bank, Indian Bank, Punjab National Bank, UCO Bank, Corporation Bank, United Bank, Oriental Bank, Vijaya Bank, Union Bank and Andhra Bank. Each of these banks has a share in the project debt ranging from Rs 100 crore to Rs 300 crore, the sources said. The equity capital of Rs 860 crore has also undergone some changes. The Lanco group would hold 74 per cent (Rs 636 crore) and the Nagarjuna group would hold the remaining 26 per cent (Rs 224 crore). Wet financial closure has now been extended to September this year, the sources said, instead of the original date of June 30. The changed debt-equity mix was also prompted by the ability of the project to support higher debt. Company officials said that the project would still have a debt service coverage ratio of about 1.5 times. This ratio indicates that the net revenues would be 150 per cent of debt servicing costs.
Bring down tariffs
The sources said the changes would help bring power tariffs down by another six paise per unit on a levellised basis or in the range of Rs 2 per unit. The power tariff reduction would take place, since the return on equity would now be calculated on the revised ratio. The return on equity prescribed by the CERC for tariff purposes is currently 14 per cent at 80 per cent plant load factor. The debt cost would be far lower and is unlikely to exceed 10 per cent the sources said, even assuming the current upward momentum of interest rates. The reduced tariff consequently would make it financially attractive to beneficiary States and as competitive to the central generating stations. NPCL has signed power purchase agreements with Karnataka and Kerala. Sources said that acquisition of 650 acres of land was complete and civil works were already under way, and the project is likely to begin operations by early 2009. Fuel supply has also been tied up with the Australian coal suppliers. When completed, the project would be in a position to feed about 19.5 million units into the grid every day.
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